U.S. Household Debt Increases

May 14, 2014

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Americans made more progress in
repairing their postrecession finances and have increased their overall
borrowing, yet they are also showing an aversion to credit cards and new
mortgages that could hinder the economic recovery.

Household debt—including
mortgages, credit cards, auto loans and student loans—rose $129 billion between
January and March to $11.65 trillion, new figures from the Federal Reserve Bank
of New York showed Tuesday. That was the third consecutive quarterly increase.

Behind the uptick:
Mortgage balances—which make up the bulk of U.S. household debt—rose $116
billion to $8.2 trillion, thanks in part to fewer people going into
foreclosure, which drags down mortgage debt. Auto-loan balances grew $12
billion to $875 billion. Student-loan balances increased $31 billion to $1.1
trillion, maintaining its place as the fastest-growing debt category.

Despite all their
progress digging out of the downturn, however, U.S. consumers are displaying a
heightened wariness about using credit cards or taking out new mortgages.

The amount of credit-card debt
outstanding fell to the lowest levels since 2002. Credit-card balances fell $24
billion to $659 billion from the prior quarter, just slightly below the level
from a year earlier. New originations of mortgages dropped for the third
straight quarter to $332 billion, the lowest since the third quarter of 2011,
possibly due to rising home prices in many markets that have made buying less
affordable.

The figures suggest
Americans are still playing it safe when it comes to borrowing, a practice that
should help protect them from longer-run excesses. But the combination of weak
demand for credit and slow real wage growth could bode ill for consumer
spending, which accounts for more than two-thirds of economic output.